Articles Posted inQA3 Financial

QA3 Financial Corp. has announced that it will be closing down its business. In an email sent to its 400 brokers after the market closed on Friday, QA3 owner and CEO Steve Wild says the decision was made following the securities arbitration award that was issued against the independent brokerage firm last month and the fact that its errors and omissions carrier has yet to provide coverage.

Catlin Specialty Insurance Co. is QA3’s insurer. The broker-dealer sued the insurer last year alleging failure to uphold the insurance contract, which QA3 claims is supposed to provide $7.5 million in coverage for legal claims, expenses, and damages related to private placement. Catlin then sued QA3, contending that there was a $1 million cap on QA3 private-placement claims.

Once a leading seller of high-risk private placements, QA3 has been dealing with dozens of arbitration cases and securities lawsuits from clients that purchased private placements, such as Medical Capital Holdings Inc, DBSI Inc., and Provident Royalties LLC.

Recently, a Financial Industry Regulatory Authority Inc. panel ordered QA3 to pay $1.6 million after losing an arbitration claim filed by an elderly couple. The panel found that the brokerage firm failed to adequately supervise broker James R. Files or provide sufficient training regarding the sale of tenant-in-common exchanges (TIC’s). The plaintiffs, Mary-Ann and Arthur Cargill, are in their 70’s, possess limited financial resources, and don’t have a great deal of investment experience. The FINRA panel also says that the brokerage firm appears to have routinely disregarded sales and marketing approval practices.